Federal Insurance Office Request for Information on the Insurance Sector and Climate-Related Financial Risks, 48814-48819 [2021-18713]
Download as PDF
<![CDATA[
khammond on DSKJM1Z7X2PROD with NOTICES
48814
Federal Register / Vol. 86, No. 166 / Tuesday, August 31, 2021 / Notices
GM argues that the noncompliance is
inconsequential because the subject
vehicles’ parking lamp-headlamp
combination does not exceed the
maximum permitted glare values for
headlamps specified in FMVSS No. 108.
While NHTSA agrees that the parking
lamp-headlamp combination does not
appear to exceed test points
representing the vicinity of an oncoming
driver’s eyellipse (e.g., 1U—1.5L–L;
0.5U—1.5L–L; 1.5U—1R- R; 0.5 U—1R–
3R; 0.5 U—1R–3R), it is noteworthy that
glare points are not distinctly defined in
FMVSS No. 108. Based on the data
provided by GM, 8 out of 19 test points
for the subject parking lamp exceeded
the FMVSS No. 108 maximum allowed
value of 125 cd, seven of which
exceeded the maximum allowed values
by 38% to 113%. As such, these lamps
will be noticeably brighter than a
compliant lamp and can potentially be
distracting to other drivers.7
Further, it does not appear that a
comprehensive set of data was provided
by GM. While GM provided data for
combined lower beam and parking lamp
photometry, GM provided no data
pertaining exclusively to the lower
beam or the turn signal photometry. In
addition, GM only provided select test
points for lower beam photometry
combined with the parking lamps.
It is important to note that paragraph
S7.1.1.12 of FMVSS No. 108 specifies
the ratio requirements between the front
turn signal lamps and the parking
lamps/clearance lamps. This establishes
the requirement that turn signal lamps
have three to five times (dependent on
the test point) the luminous intensity of
the parking lamps when turn signal
lamps are combined with parking
lamps. If the turn signal lamps are not
sufficiently bright enough to be
discernable from the parking lamp, then
other drivers may not be able to clearly
identify the vehicles intent to turn,
which poses an increased risk to motor
vehicle safety.
While GM argues that extinguishing
the parking lamp on the side of the
vehicle with the active turn signal
prevents impairment of the performance
of the activated turn signal, NHTSA
does not find this compelling because
extinguishing the parking lamp violates
the steady burning requirement of
FMVSS No. 108. See 49 CFR 571.108,
Table 1–a (requiring that the parking
lamp ‘‘be activated when the headlamps
are activated in a steady burning state’’).
In the event that the turn signal lamp
7 GM argues in its petition that glare from the
parking lamp does not present an unreasonable risk
to the safety of oncoming drivers however that it
not the standard by which NHTSA makes
determinations of inconsequential noncompliance.
VerDate Sep<11>2014
20:08 Aug 30, 2021
Jkt 253001
fails to activate and the parking lamp is
still extinguished, this will reduce the
visibility of the vehicle, thus, increasing
the risk to motor vehicle safety.
Per the activation requirements for
parking lamps, as specified in Table 1–
a of FMVSS No. 108, NHTSA agrees
with the public comment submitted
which states that the parking lamp is
required to be on, be steady burning
when the headlights are activated, and
should not be deactivated when the turn
signal lamp is used.
GM has offered to issue a service
bulletin directing dealers to remedy the
noncompliance when the vehicles are
brought in for service. NHTSA notes
that a manufacturer’s decision to
conduct a service campaign is not a
substitute for conducting a recall since
consumers will neither be notified of
the noncompliance nor informed to
return to the dealership for a free
remedy.
NHTSA’s Decision: As indicated in
the analysis of GM’s petition provided
above, NHTSA finds that GM has not
demonstrated that the noncompliance of
the subject vehicles with FMVSS No.
108 is inconsequential to motor vehicle
safety. Accordingly, NHTSA hereby
denies GM’s petition and GM is
consequently obligated to provide
notification of, and a free remedy for,
that noncompliance pursuant to 49
U.S.C. 30118 and 30120.
Authority: (49 U.S.C. 30118, 30120:
delegations of authority at 49 CFR 1.95
and 501.8)
Joseph Kolly,
Acting Associate Administrator for
Enforcement.
[FR Doc. 2021–18766 Filed 8–30–21; 8:45 am]
BILLING CODE 4910–59–P
DEPARTMENT OF THE TREASURY
Federal Insurance Office Request for
Information on the Insurance Sector
and Climate-Related Financial Risks
Federal Insurance Office,
Departmental Offices, Department of the
Treasury.
ACTION: Request for Information.
AGENCY:
The Federal Insurance Office
(FIO) of the U.S. Department of the
Treasury (Treasury) is issuing this
Request for Information (RFI), following
the May 20, 2021 Executive Order on
Climate-Related Financial Risk, to
solicit public input on FIO’s future work
relating to the insurance sector and
climate-related financial risks. FIO’s
efforts will focus on three initial
climate-related priorities, which are
SUMMARY:
PO 00000
Frm 00156
Fmt 4703
Sfmt 4703
described below. Additionally, this RFI
seeks input on how FIO’s data
collection and dissemination authorities
can best be used by FIO in support of
these priorities, as well as to monitor
and assess the insurance sector and
climate-related financial risks.
DATES: Submit written comments on or
before November 15, 2021.
ADDRESSES: Submit comments
electronically through the Federal
eRulemaking Portal at https://
www.regulations.gov, in accordance
with the instructions on that site, or by
mail to the Federal Insurance Office,
Attn: Elizabeth Brown, Senior Insurance
Regulatory Policy Analyst,
Elizabeth.Brown@treasury.gov, (202)
597–2869, Room 1410 MT, Department
of the Treasury, 1500 Pennsylvania
Avenue NW, Washington, DC 20220.
Because postal mail may be subject to
processing delays, it is recommended
that comments be submitted
electronically. If submitting comments
by mail, please submit an original
version with two copies. Comments
should be captioned ‘‘FIO Insurance
Sector and Climate-Related Financial
Risks.’’ In general, Treasury will post all
comments to www.regulations.gov
without change, including any business
or personal information provided such
as names, addresses, email addresses, or
telephone numbers. All comments,
including attachments and other
supporting materials, are part of the
public record and subject to public
disclosure. You should submit only
information that you wish to make
available publicly.
FOR FURTHER INFORMATION CONTACT:
Steven Seitz, Director, Federal
Insurance Office, Steven.Seitz@
treasury.gov, (202) 531–0915; Stephanie
Schmelz, Deputy Director,
Stephanie.Schmelz@treasury.gov, (202)
341–5258; Elizabeth Brown, Senior
Insurance Regulatory Policy Analyst,
Elizabeth.Brown@treasury.gov, (202)
597–2869 or Bret Howlett, Senior
Insurance Regulatory Policy Analyst,
Bret.Howlett@treasury.gov, (202) 570–
3916. Persons who have difficulty
hearing or speaking may access these
numbers via TTY by calling the toll-free
Federal Relay Service at (800) 877–8339.
SUPPLEMENTARY INFORMATION:
Background
The Insurance Sector and ClimateRelated Financial Risks
The Intergovernmental Panel on
Climate Change (IPCC) reported this
year that ‘‘[h]uman-induced climate
change is already affecting many
weather and climate extremes in every
region across the globe. Evidence of
E:\FR\FM\31AUN1.SGM
31AUN1
Federal Register / Vol. 86, No. 166 / Tuesday, August 31, 2021 / Notices
observed changes in extremes such as
heatwaves, heavy precipitation,
droughts, and tropical cyclones, and, in
particular, their attribution to human
influence, has strengthened since
[2013].’’ 1 The United States has
experienced a dramatic increase in the
frequency and severity of climaterelated disasters with a corresponding
increase in economic losses in the past
40 years.2 Economic growth combined
with changing socioeconomic trends,
such as urbanization and the migration
patterns to areas at higher risk of
climate-related disasters, are increasing
the financial risks associated with the
effects of climate change. The increased
frequency and severity of climaterelated disasters, as well as the
magnitude of associated insured losses,
highlight the significance of these
climate-related financial risks and the
role of insurers in responding to them.3
Additionally, some insurance
consumers are increasingly unable to
find affordable and available property
insurance coverage in certain insurance
markets.4
The impact of climate change also
affects insurers through their broader
role in financial markets. For example,
the U.S. life insurance sector is one of
the largest investors in the U.S capital
markets, with over $4.7 trillion in
investments held in general accounts at
year-end 2020.5 As owners of significant
khammond on DSKJM1Z7X2PROD with NOTICES
1 IPCC,
Climate Change 2021: The Physical
Science Basis—Summary for Policymakers, 7
August 2021, SPM–10, https://www.ipcc.ch/report/
ar6/wg1/downloads/report/IPCC_AR6_WGI_
SPM.pdf.
2 See, e.g., Adam B. Smith, ‘‘2010–2019: A
Landmark Decade of U.S. Billion-Dollar Weather
and Climate Disasters,’’ NOAA Climate.gov Blog,
January 8, 2020, https://www.climate.gov/newsfeatures/blogs/beyond-data/2010-2019-landmarkdecade-us-billion-dollar-weather-and-climate. FIO
is using the term ‘‘climate-related disasters’’ to refer
to the type of weather-related events (such as
wildfires, floods, hurricanes, etc.) that may be
produced or exacerbated by climate change, as
distinct from non-weather related, natural events
(such as earthquakes and tsunamis).
3 Aon, Weather, Climate & Catastrophe Insight
Annual Report 2020 (2021), 9, https://
www.aon.com/global-weather-catastrophe-naturaldisasters-costs-climate-change-2020-annual-report/
index.html?utm_source=region&utm_
medium=africa&utm_campaign=natcat21 (Aon
2020 Cat Insight Annual Report).
4 See, e.g., Christopher Flavelle, ‘‘Wildfires
Hasten Another Climate Crisis: Homeowners Who
Can’t Get Insurance,’’ New York Times, September
2, 2020, https://www.nytimes.com/2020/09/02/
climate/wildfires-insurance.html; Emma Kerr,
‘‘Here’s How You’re Already Paying for Climate
Change,’’ U.S. News & World Report, June 10, 2021,
https://money.usnews.com/money/personalfinance/spending/articles/heres-how-youre-payingfor-climate-change.
5 Best’s Special Report: First Look: 12 Month 2020
Life/Annuity Financial Results (March 23, 2021),
https://www.businesswire.com/news/home/
20210323005711/en/Best%E2%80%99s-Special-
VerDate Sep<11>2014
20:08 Aug 30, 2021
Jkt 253001
amounts of assets, insurers could be
vulnerable to potential decreases in
asset values arising from the transition
towards a low-carbon economy.6
More broadly, climate-related
financial risks may present challenges to
the stability of the financial system (of
which the insurance sector is an
important part) including as shocks that
increase financial system
vulnerabilities. In a 2020 report, the
Financial Stability Board (FSB)
described climate-related risks as falling
into three categories:
• Physical risks are ‘‘the possibility
that the economic costs of the increasing
severity and frequency of climatechange related extreme weather events,
as well as more gradual changes in
climate, might erode the value of
financial assets, and/or increase
liabilities.’’ 7
• Transition risks can arise from the
technological, market, and policy
changes needed to adjust to a low
carbon economy and their effects on the
value of financial assets and liabilities.
Depending on the nature, speed, and
focus of these changes, transition risks
may pose varying levels of financial and
reputational risk to organizations.8
• Liability risks may ‘‘arise when
parties are held liable for losses related
to environmental damage that may have
been caused by their actions or
omissions.’’ 9
The same FSB report described how
these risks might affect financial
stability and highlighted the potential
for new risks introduced from the
response of the global financial system
to climate-related shocks.10
An assessment of how climate-related
financial risks may affect the insurance
sector should consider physical risks,
transition risks, and liability risks. More
specifically, the assessment should
include how the life and property &
casualty (P&C) insurers’ business
models (including their underwriting
Report-U.S.-LifeAnnuity-Industry%E2%80%99sNet-Income-Cut-Nearly-in-Half-in-2020.
6 New York Department of Financial Services, An
Analysis of New York Domestic Insurers’ Exposure
to Transition Risks and Opportunities from Climate
Change (June 10, 2021), https://www.dfs.ny.gov/
system/files/documents/2021/06/dfs_2dii_report_
ny_insurers_transition_risks_20210610.pdf
7 FSB, The Implications of Climate Change for
Financial Stability (November 23, 2020), 4, 16,
https://www.fsb.org/wp-content/uploads/
P231120.pdf (FSB Climate Change Implications
Report).
8 See FSB Climate Change Implications Report;
Task Force on Climate-Related Financial
Disclosures, Recommendations of the Task Force on
Climate-related Financial Disclosures (June 15,
2017), 13, https://www.fsb-tcfd.org/publications/
final-recommendations-report/.
9 FSB Climate Change Implications Report.
10 FSB Climate Change Implications Report, 1.
PO 00000
Frm 00157
Fmt 4703
Sfmt 4703
48815
activities, market activities, and
investment activities) are affected by
each category of risk.11
The lack of available data complicates
the ability to conduct such assessments.
Government and private sector
stakeholders have noted the significant
issues caused by the lack of available
data to assess climate-related financial
risk within the insurance sector.12 These
stakeholders could all potentially
benefit from high-quality, consistent,
comparable, and reliable data for their
risk management, disclosures, and
forward plans to assess and address
climate-related financial risks. State
regulatory tools, such as the Own Risk
and Solvency Assessment (ORSA), may
capture data on some climate-related
financial risks if they are recognized by
a reporting insurer as having a material
impact on its solvency over the next one
to two years, but these tools may be
inadequate to assess climate-related
risks, particularly over a longer time
horizon. Additionally, only six states
have regularly collected from insurers
certain limited, high-level qualitative
data directly focused on climate-related
financial risks.13 No federal authority is
collecting climate-related financial data
specific to the insurance sector.
Executive Orders
The President’s May 20, 2021,
Executive Order on Climate-Related
11 See, e.g., FSB Climate Change Implications
Report, 23 (noting that, if the materialization of
climate related risks were to lead to large increases
in insured losses from physical risks, this might
reduce the degree to which households and
companies could insure against these risks).
12 FSB Climate Change Implications Report, 28;
FSB and International Monetary Fund, The
Financial Crisis and Data Gaps: G20 Data Gaps
Initiative (DGI–2) The Fifth Progress Report—
Countdown to 2021 in Light of COVID–19 (October
2020), 7, https://www.fsb.org/wp-content/uploads/
P071020.pdf; International Association of Insurance
Supervisors and Sustainable Insurance Forum,
Application Paper on the Supervision of Climaterelated Risks in the Insurance Sector (May 2021),
9, 12–13, 28, https://www.iaisweb.org/page/
supervisory-material/application-papers/file/97146/
application-paper-on-the-supervision-of-climaterelated-risks-in-the-insurance-sector#; ‘‘How
Insurance Companies Can Prepare for Risk from
Climate Change,’’ Deloitte, https://
www2.deloitte.com/us/en/pages/financial-services/
articles/insurance-companies-climate-changerisk.html.
13 National Association of Insurance
Commissioners (NAIC) Center for Insurance Policy
and Research, Assessment of and Insights from
NAIC Climate Risk Disclosure Data (November
2020), 5–6, https://content.naic.org/sites/default/
files/cipr-report-assessment-insights-climate-riskdata.pdf. The six states—California, Connecticut,
Minnesota, New Mexico, New York, and
Washington—use the Insurer Climate Risk
Disclosure Survey developed by the NAIC. The
states require survey completion only by insurers
that are regulated by them and who annually report
$100 million or more in premiums and annuity
considerations.
E:\FR\FM\31AUN1.SGM
31AUN1
48816
Federal Register / Vol. 86, No. 166 / Tuesday, August 31, 2021 / Notices
Financial Risk emphasizes the
important role that the insurance sector
can play in combatting climate change.
It instructs the Secretary to task FIO ‘‘to
assess climate-related issues or gaps in
the supervision and regulation of
insurers, including as part of the
[Financial Stability Oversight Council]
FSOC’s analysis of financial stability,
and to further assess, in consultation
with States, the potential for major
disruptions of private insurance
coverage in regions of the country
particularly vulnerable to climate
change impacts.’’ 14
The May 20 Executive Order
complements the President’s January 27,
2021 Executive Order on Tackling the
Climate Crisis at Home and Abroad,
which set forth the Administration’s
policy to ‘‘organize and deploy the full
capacity of its agencies to combat the
climate crisis to implement a
Government-wide approach.’’ The
President’s January 27 Executive Order
puts the climate crisis at the center of
U.S. foreign policy and national security
and seeks to ‘‘put the United States on
a path to achieve net-zero emissions,
economy-wide, by no later than
2050.’’ 15
FIO’s Authorities
khammond on DSKJM1Z7X2PROD with NOTICES
Title V of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
established FIO within Treasury. FIO’s
statutory authorities include, among
other things, monitoring all aspects of
the insurance sector, including
identifying issues or gaps in the
regulation of insurers that could
contribute to a systemic crisis in the
insurance sector or the U.S. financial
system. FIO’s authorities also include
monitoring the availability and
affordability of insurance products for
traditionally underserved communities
and consumers, minorities, and lowand moderate-income persons.16 These
segments of the population may be
negatively and disproportionately
impacted by climate change.17
In addition, FIO is authorized to
collect data and information on and
from the insurance sector, including
14 Exec. Order No. 14,030 § 3(b)(i), 86 FR 27967
(May 20, 2021), https://www.federalregister.gov/
documents/2021/05/25/2021-11168/climaterelated-financial-risk.
15 Exec. Order No. 14,008 § 201, 86 FR 7619
(January 27, 2021), https://www.federalregister.gov/
documents/2021/02/01/2021-02177/tackling-theclimate-crisis-at-home-and-abroad.
16 31 U.S.C. 313(c)(1)(A)–(B).
17 See, e.g., Alexa Jay et al., ‘‘Overview,’’ in
Impacts, Risks and Adaptation in the United States:
Fourth National Climate Assessment (2018), 36,
https://nca2018.globalchange.gov/downloads/
NCA4_Ch01_Overview.pdf.
VerDate Sep<11>2014
20:08 Aug 30, 2021
Jkt 253001
through the use of subpoenas.18 FIO is
also authorized to analyze and
disseminate data and information and
issue reports on all lines of insurance,
except health insurance.19
Because climate change is a global
phenomenon, FIO’s international
insurance statutory authorities can help
achieve U.S. goals in this area. FIO is
authorized to coordinate federal efforts
and develop federal policy on
prudential aspects of international
insurance matters, including
representing the United States, as
appropriate, in the International
Association of Insurance Supervisors
(IAIS).20 Finally, the FIO Director also
serves as a non-voting member of the
FSOC.21 The May 20 Executive Order
directs that FIO contribute to FSOC’s
analysis of financial stability related to
climate change.22
FIO’s Current Engagement on ClimateRelated Issues
FIO’s role and statutory authorities
enable it to take a leadership position in
analyzing how the insurance sector may
be impacted by, and help mitigate,
climate-related risks. FIO is engaging
with the NAIC and state insurance
regulators through their work on
climate-related topics.23 FIO also
represents the United States at the IAIS,
is a member of the UN’s Sustainable
Insurance Forum, and is a member of
the Organisation of Economic
Cooperation and Development’s
Insurance and Private Pensions
Committee—all of which are
increasingly focused on climate-related
issues. In addition, FIO is discussing
climate-related issues with insurance
authorities in both the United States and
the European Union through the EUU.S. Insurance Project. FIO also
represents Treasury in the federal
Mitigation Framework Leadership
Group, which is a national structure to
coordinate disaster mitigation efforts
across the federal government and with
state, local, tribal, and territorial
representatives. FIO is engaging with
the Securities and Exchange
Commission and other members of the
FSOC on climate-related financial risks.
More generally, FIO provides insurance
expertise and technical assistance
within Treasury and to other federal
18 31
U.S.C. 313(e)(6).
U.S.C. 313(e)(1).
20 31 U.S.C. 313(c)(1)(E).
21 12 U.S.C. 5321(b)(2)(B).
22 Exec. Order No. 14,030 § 3(b)(i).
23 See, e.g., David Altmaier, Presidential Address
(speech, NAIC Spring 2021 Opening Session, April
12, 2021), https://content.naic.org/article/notice_
spring_2021_opening_session_prepared_
remarks.htm.
19 31
PO 00000
Frm 00158
Fmt 4703
Sfmt 4703
agencies, including to the Federal
Emergency Management Agency in
connection with the National Flood
Insurance Program (NFIP). FIO’s
engagement on climate-related issues
also includes the issuance of public
reports addressing natural disasters,
climate change, and insurance,
including through its annual report to
Congress and the President.24
FIO’s Initial Climate-Related Priorities
FIO intends for its climate-related
work to respond not only to the
Executive Orders, but also to provide an
insurance-specific focus within
Treasury’s broader climate work,
including working with Treasury’s
Climate Hub.25 In particular, FIO
intends to initially focus on the
following three climate-related
priorities:
1. Insurance Supervision and
Regulation: Assess climate-related
issues or gaps in the supervision and
regulation of insurers, including their
potential impacts on U.S. financial
stability.
Maintaining the financial stability of
the insurance sector will involve
identifying and filling gaps (if any) in
insurance supervision with a focus on
assessing climate-related financial risks.
This will include monitoring the
integration of climate-related financial
risks into insurance supervisory
practices and regulatory frameworks, as
well as assessing whether sufficient
data, methodologies, and tools exist to
manage the solvency of insurers and to
protect them against the long-term risk
of climate change. To that end, FIO
plans to assess supervisory practices
and resources, including but not limited
to examination policies and procedures,
solvency assessment and techniques,
data availability and integrity, public
disclosures, modeling, and forwardlooking assessments (e.g., scenario
analysis, stress testing). FIO will consult
with individual state insurance
regulators and the NAIC during its
assessment of such supervisory
practices and resources.
2. Insurance Markets and Mitigation/
Resilience: Assess the potential for
24 See, e.g., FIO, Report Providing an Assessment
of the Current State of the Market for Natural
Catastrophe Insurance in the United States (2015),
https://home.treasury.gov/system/files/311/
Natural%20Catastrophe%20Report.pdf. See also
‘‘Reports and Notices,’’ FIO, https://
home.treasury.gov/policy-issues/financial-marketsfinancial-institutions-and-fiscal-service/federalinsurance-office/reports-notices (providing links to
all FIO Annual Reports and other reports).
25 See U.S. Department of the Treasury, ‘‘Treasury
Announces Coordinated Climate Policy Strategy
with New Treasury Climate Hub and Climate
Counselor,’’ news release, April 19, 2021, https://
home.treasury.gov/news/press-releases/jy0134.
E:\FR\FM\31AUN1.SGM
31AUN1
Federal Register / Vol. 86, No. 166 / Tuesday, August 31, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
major disruptions of private insurance
coverage in U.S. markets that are
particularly vulnerable to climate
change impacts; facilitate mitigation and
resilience for disasters.
Growing evidence indicates that
climate change may be associated with
a decline in the availability and
affordability of insurance provided by
the private sector (i.e., private insurance
coverage) in certain markets.26 The
creation and expansion of insurers of
last resort by individual U.S. states and
the federal government highlights this
problem.27 FIO intends to examine the
insurability of disasters that are
produced or exacerbated by climate
change, including wildfires, hurricanes,
floods, wind damage, and extreme
temperatures.
Additionally, traditionally
underserved communities and
consumers, minorities, and low- and
moderate-income persons may have
disproportionate challenges in obtaining
affordable property insurance to cover
the risks posed by climate-related
disasters; further declines in available
and affordable insurance could
exacerbate the inequities that these
persons face.28 This situation
underscores the need to identify
solutions to address the growing
protection gap exacerbated by climate
change.29 Therefore, FIO also intends to
assess the availability and affordability
of insurance coverage in high-risk areas,
particularly for traditionally
26 See, e.g., FIO, Annual Report on the Insurance
Industry (September 2020), 59–60, https://
home.treasury.gov/system/files/311/2020-FIOAnnual-Report.pdf. See also Exec. Order No. 14,030
§ 3(b)(i) (directing FIO to assess ‘‘the potential for
major disruptions of private insurance coverage in
regions of the country particularly vulnerable to
climate change impacts’’ as distinct from insurance
provided by or backed by a government entity, such
as the federal NFIP. (emphasis added)).
27 See, e.g., ‘‘California FAIR Plan Property
Insurance,’’ https://www.cfpnet.com; ‘‘About Us:
Who We Are,’’ Citizens Property Insurance
Corporation, https://www.citizensfla.com/who-weare; Congressional Research Service, Introduction to
the National Flood Insurance Program (NFIP),
Report No. R44593 (Jan. 5, 2021), 1, https://fas.org/
sgp/crs/homesec/R44593.pdf.
28 See, e.g., Rachel Morello-Frosch, et al., The
Climate Gap: Inequalities in How Climate Change
Hurts Americans & How to Close the Gap (2018),
17, https://dornsife.usc.edu/assets/sites/242/docs/
ClimateGapReport_full_report_web.pdf.
29 See, e.g., Aon 2020 Cat Insight Annual Report;
Federal Advisory Committee Protection Gap
Subcommittee, Addressing the Protection Gap
Through Public/Private Partnerships & Other
Mechanisms, (December 5, 2019), https://
home.treasury.gov/system/files/311/
December2019FACI_
ProtectionGapPresentation.pdf; ACPR, A First
Assessment of Financial Risks Stemming from
Climate Change: The Main Results of the 2020
Climate Pilot Exercise, No. 122–2021 (2021), 60,
https://acpr.banque-france.fr/sites/default/files/
medias/documents/20210602_as_exercice_pilote_
english.pdf.
VerDate Sep<11>2014
20:08 Aug 30, 2021
Jkt 253001
underserved communities and
consumers, minorities, and low- and
moderate-income persons.
Beyond analyzing potential insurance
market disruptions, FIO intends to look
at solutions, including identifying best
practices for mitigation that can then
increase post-disaster resilience,
including solutions that can help ensure
sufficient availability and affordability
of insurance for consumers in light of
increasing climate-related disaster risk.
In addition, FIO will examine the role
of insurers in supporting climate
resilience in critical infrastructure, as
well as in supporting green investment
initiatives.
3. Insurance Sector Engagement:
Increase FIO’s engagement on climaterelated issues; leverage the insurance
sector’s ability to help achieve climaterelated goals.
FIO plans to increase its engagement
on climate-related issues and take a
leadership role in analyzing how the
insurance sector may help mitigate
climate-related risks. Throughout this
work, FIO will engage with
stakeholders, including through this
RFI. Additionally, the insurance sector
has the ability to shape industries,
products, and practices through its
functions in the financial markets and
broad understanding of risk. Thus, it
can influence climate-related activity of
other sectors of the U.S. economy. FIO
therefore will engage with the insurance
sector to assess how the sector may help
achieve national climate-related goals,
including mitigation, adaptation, and
transition to a lower carbon economy.
This could include insurance sector
consideration of underwriting activities,
investment holdings, and business
operations to support a low emissions
economy.30 It also could encompass
insurance sector transition of its
operational and attributable greenhouse
gas (GHG) emissions.31 In addition, FIO
30 See, e.g., U.N. Environment Programme
Finance Initiative, ‘‘The Net Zero Insurance
Alliance, Statement of Commitment by Signatory
Companies’’ (July 2021), 1 n. 1, https://
www.unepfi.org/psi/wp-content/uploads/2021/07/
NZIA-Commitment.pdf.
31 GHG includes Scope 1, 2, and 3 emissions.
Scope 1 emissions are direct GHG emissions that
occur from sources controlled or owned by an
entity (such as an insurer). Scope 2 emissions are
indirect GHG emissions associated with purchase of
electricity, steam, heat, or cooling by an entity.
Scope 3 emissions are all other indirect GHG
emissions not covered by Scope 2 and where an
entity may impact in the value chain, such as
business travel and investments. For insurers,
Scope 3 emissions would include the Scope 1, 2,
and 3 emissions by policyholders when significant
(and when data is available to determine them).
See, e.g., ‘‘Scope 1 and Scope 2 Inventory
Guidance,’’ U.S. Environmental Protection Agency
(EPA), https://www.epa.gov/climateleadership/
scope-1-and-scope-2-inventory-guidance; ‘‘Scope 3
PO 00000
Frm 00159
Fmt 4703
Sfmt 4703
48817
plans to consider ways to address the
lack of common methodology and
standardization in measuring financed
emissions, particularly those of nonpublic companies in which the
insurance sector underwrites and
invests. Currently, only one state has
passed legislation that is intended to
leverage the insurance sector’s ability to
affect GHG emissions.32
I. Request for Comments
Below, FIO invites public comments
on a series of questions. The responses
to this RFI will help inform FIO’s
assessment of the implications of
climate-related financial risks for the
insurance sector. It also will help FIO
better understand (1) which data
elements are necessary to accurately
assess climate risk; (2) which data
elements remain unavailable; and (3)
how FIO could collect this data and
make it available to stakeholders as
needed. Access to high-quality, reliable,
and consistent data will be necessary for
accomplishing all three of FIO’s initial
climate-related priorities. FIO also will
identify and issue recommendations on
individual actions that can be taken by
various insurance sector stakeholders
(such as state insurance regulators,
insurers, and policyholders) to address
climate-related financial risks and
facilitate the U.S. insurance sector’s
transition to a more sustainable future.
FIO recognizes that an effective policy
response to climate-related financial
risk requires an iterative approach and
intends to adjust its work and priorities
as needed.
Executive Order on Climate-Related
Financial Risk
1. Please provide your views on how
FIO should assess and implement the
action items set forth for FIO in the
Executive Order on Climate-Related
Financial Risk.33
FIO’s Initial Climate-Related Priorities
2. Please provide your views on FIO’s
three climate-related priorities and
related activities, particularly with
regard to whether there are alternative
or additional priorities or activities that
FIO should evaluate regarding the
impact of climate change on the
insurance sector and the sector’s effect
on mitigation and adaptation efforts.
Inventory Guidance,’’ EPA, https://www.epa.gov/
climateleadership/scope-3-inventory-guidance.
32 Claire Wilkinson, ‘‘Connecticut Bill Calls for
Regulation of Insurers’ Climate Risks,’’ Business
Insurance, June 17, 2021, https://
www.businessinsurance.com/article/20210617/
NEWS06/912342605/Connecticut-bill-calls-forregulation-of-insurers%E2%80%99-climate-risks.
33 Exec. Order No. 14,030 § 3(b)(i).
E:\FR\FM\31AUN1.SGM
31AUN1
48818
Federal Register / Vol. 86, No. 166 / Tuesday, August 31, 2021 / Notices
Climate-Related Data and FIO’s Data
Collection and Data Dissemination
Authorities
3. What specific types of data are
needed to measure and effectively
assess the insurance sector’s exposures
to climate-related financial risks? If data
is not currently available, what are the
key challenges in the collection of such
climate-related data? In your response,
please provide your views on the
quality, consistency, comparability,
granularity, and reliability of the
available or needed data and associated
data sources.
4. What are the key factors for the
insurance sector in developing
standardized, comparable, and
consistent climate-related financial risk
disclosures? In your response, please
discuss whether a global approach for
disclosure standards needs to be
adopted domestically for insurers.
Please also address the advantages and
disadvantages of current proposals to
standardize such disclosures, such as
those set forth by the Task Force on
Climate-Related Financial Disclosures
or the NAIC’s Insurer Climate Risk
Disclosure Data Survey.
5. Please provide your views on how
FIO’s data collection and dissemination
authorities should be used by FIO to
research, monitor, assess, and publicize
climate-related financial risk and other
areas of the insurance markets that are
affected by climate change.
6. What are the likely advantages and
disadvantages of a verified, open-source,
centralized database for climate-related
information on the insurance sector?
Please include in your response the
types of information, if any, that may be
most useful to disseminate through such
a database and the key elements in the
development and design of such a
database.
khammond on DSKJM1Z7X2PROD with NOTICES
Insurance Supervision and Regulation
7. How should FIO identify and assess
climate-related issues or gaps in the
supervision and regulation of insurers,
including their potential impact on
financial stability? In your response,
please address insurance supervision
and regulations concerning: (a)
Prudential concerns, (b) market conduct
regarding insurance products and
services, and (c) consumer protection. In
addition, please discuss how FIO
should assess the effectiveness of U.S.
state insurance regulatory and
supervisory policies in addressing and
managing the climate-related financial
risks with regard to the threat they may
pose to U.S financial stability, including
identifying (1) the major channels
through which climate-related physical,
VerDate Sep<11>2014
20:08 Aug 30, 2021
Jkt 253001
transition, and/or liability risks may
impact the stability of the U.S.
insurance market, and (2) the degree to
which insurers’ business models could
be affected by each category of risk and
the relevant time horizons for such
effects.
8. Please identify the key structural
issues that could inhibit the ability of
insurance supervisors to assess and
manage climate-related financial risk in
the insurance sector (e.g., accounting
frameworks, other standards). What
barriers could inhibit the integration of
climate-related financial risks into
insurance regulation?
9. What approaches used by other
jurisdictions or multi-national
organizations should FIO evaluate that
would help inform it about existing
supervisory and regulatory issues and
gaps concerning climate-related
financial risks? Please describe these
approaches, including their advantages
and disadvantages, as well as available
data sources on these approaches.
Insurance Markets and Mitigation/
Resilience
10. What factors should FIO consider
when identifying and assessing the
potential for major disruptions of
insurance coverage in U.S. markets that
are particularly vulnerable to climate
change impacts?
11. What markets are currently facing
major disruptions due to climate change
impacts? What markets are likely to be
at risk for major disruptions due to
climate change impacts in the future?
When discussing markets at risk for
future disruption, please estimate the
likely time horizons (e.g., 5, 10, 20, or
more years) when these disruptions may
occur.
12. Climate change is currently
exacerbating economic losses caused by
weather-related disasters and is
projected to cause further damage in the
future. Please provide information on
the actions that insurers have taken in
response to the threat of increased
economic losses from climate-related
disasters, including how insurers are
incorporating mitigation and resilience
considerations into their business
operations, as well as what other
strategies or solutions that insurers or
U.S. regulators may want to explore that
would help insurers mitigate the impact
of climate change and build resilience.
13. To what extent, if any, are models
(whether internal proprietary models,
open-source models, or third-party
vendor models) used in the
underwriting process to consider the
impact of climate change? How do these
models affect pricing of insurance
products and business decisions (e.g.,
PO 00000
Frm 00160
Fmt 4703
Sfmt 4703
level of catastrophe exposure,
utilization of reinsurance)? What are the
best practices for model validation?
14. How should FIO assess the
availability and affordability of
insurance coverage in U.S. markets that
are particularly vulnerable to climate
change impacts? In your response,
please discuss how to balance
maintaining insurer solvency with the
need to address the availability and
affordability of insurance products
responsive to perils associated with
climate-related risks, particularly for
traditionally underserved communities
and consumers, minorities, and lowand moderate-income persons.
15. In what areas have public-private
partnerships or collaborations among
state or local governments been effective
in developing responses to climate
change that may be taken by the
insurance sector or insurance
regulators? How can FIO evaluate the
potential long-term or permanent effects
on the insurance sector of such publicprivate partnerships or state and local
collaborations to address climate-related
risks? How should FIO consider state
insurance regulatory efforts on
consumer education related to climate
risks?
Insurance Sector Engagement
16. Please provide your views on
additional ways that FIO should engage
with the insurance sector on climaterelated issues.
17. How should FIO assess the efforts
of insurers, through their underwriting
activities, investment holdings, and
business operations to meet the United
States’ climate goals, including reaching
net-zero emissions by 2050? For
example, what steps should the
insurance sector be taking to help
improve transparency, comparability,
and assessment of Scope 1, Scope 2,
and, to the extent possible, Scope 3
GHG activities?
18. What role or actions might states
take to encourage the insurance sector’s
transition to a low emissions
environment and an adaptive and
resilient economy? In your response,
please discuss whether efforts by states
to encourage the development of new
insurance products, to promote
sustainable investment and
underwriting activities, and to address
protection gaps created by climaterelated financial risks might facilitate
this transition.
General
19. Please provide any additional
comments or information on other
issues or topics that may be relevant to
E:\FR\FM\31AUN1.SGM
31AUN1
Federal Register / Vol. 86, No. 166 / Tuesday, August 31, 2021 / Notices
DEPARTMENT OF THE TREASURY
United States Mint
Steven E. Seitz,
Director, Federal Insurance Office.
2021 Pricing of Numismatic Gold,
Commemorative Gold, Platinum, and
Palladium Products Grid
[FR Doc. 2021–18713 Filed 8–30–21; 8:45 am]
BILLING CODE 4810–AK–P
United States Mint, Department
of the Treasury.
ACTION: Notice.
AGENCY:
The United States Mint
announces 2021 revisions to include a
premium increase in price for the
SUMMARY:
The complete 2021 Pricing of
Numismatic Gold, Commemorative
Gold, Platinum, and Palladium Products
Grid will be available at https://
catalog.usmint.gov/coin-programs/
american-eagle-coins.
Pricing can vary weekly dependent
upon the London Bullion Market
Association gold, platinum, and
palladium prices weekly average. The
pricing for all United States Mint
numismatic gold, platinum, and
palladium products is evaluated every
Wednesday and modified as necessary.
Authority: 31 U.S.C. 5111, 5112, &
9701.
Eric Anderson,
Executive Secretary, United States Mint.
[FR Doc. 2021–18730 Filed 8–30–21; 8:45 am]
khammond on DSKJM1Z7X2PROD with NOTICES
BILLING CODE P
DEPARTMENT OF VETERANS
AFFAIRS
[OMB Control No. 2900–NEW]
Agency Information Collection
Activity: Election To Waive, Retain, or
Re-Elect Due Process Rights if in
Receipt of Concurrent Active Duty
Service Pay and Disability
Compensation Pay
Veterans Benefits
Administration, Department of Veterans
Affairs.
AGENCY:
ACTION:
Notice.
Veterans Benefits
Administration, Department of Veterans
Affairs (VA), is announcing an
opportunity for public comment on the
proposed collection of certain
information by the agency. Under the
Paperwork Reduction Act (PRA) of
1995, Federal agencies are required to
publish notice in the Federal Register
concerning each proposed collection of
information, including each proposed
new collection, and allow 60 days for
public comment in response to the
notice.
SUMMARY:
Written comments and
recommendations on the proposed
collection of information should be
received on or before November 1, 2021.
DATES:
VerDate Sep<11>2014
20:08 Aug 30, 2021
Jkt 253001
PO 00000
Frm 00161
Fmt 4703
Sfmt 4703
Palladium coins and expansion of the
price ranges up to $4,049.99 within the
Numismatic Gold, Commemorative
Gold, Platinum, and Palladium Products
Grid.
FOR FURTHER INFORMATION CONTACT:
Derrick Griffin; Sales and Marketing
Directorate; United States Mint; 801 9th
Street NW; Washington, DC 20220; or
call 202–354–7500.
SUPPLEMENTARY INFORMATION: An
excerpt of the grid with a recent price
range for the palladium proof coins
appears below:
Submit written comments
on the collection of information through
Federal Docket Management System
(FDMS) at www.Regulations.gov or to
Nancy J. Kessinger, Veterans Benefits
Administration (20M33), Department of
Veterans Affairs, 810 Vermont Avenue
NW, Washington, DC 20420 or email to
nancy.kessinger@va.gov. Please refer to
‘‘OMB Control No. 2900–NEW’’ in any
correspondence. During the comment
period, comments may be viewed online
through FDMS.
FOR FURTHER INFORMATION CONTACT:
Maribel Aponte, Office of Enterprise
and Integration, Data Governance
Analytics (008), 1717 H Street NW,
Washington, DC 20006, (202) 266–4688
or email maribel.aponte@va.gov. Please
refer to ‘‘OMB Control No. 2900–NEW’’
in any correspondence.
SUPPLEMENTARY INFORMATION: Under the
PRA of 1995, Federal agencies must
obtain approval from the Office of
Management and Budget (OMB) for each
collection of information they conduct
or sponsor. This request for comment is
being made pursuant to Section
3506(c)(2)(A) of the PRA.
With respect to the following
collection of information, VBA invites
comments on: (1) Whether the proposed
collection of information is necessary
for the proper performance of VBA’s
functions, including whether the
ADDRESSES:
E:\FR\FM\31AUN1.SGM
31AUN1
EN31AU21.002</GPH>
FIO’s work on insurance and climaterelated risks.
48819
]]>Agencies
[Federal Register Volume 86, Number 166 (Tuesday, August 31, 2021)]
[Notices]
[Pages 48814-48819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18713]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Federal Insurance Office Request for Information on the Insurance
Sector and Climate-Related Financial Risks
AGENCY: Federal Insurance Office, Departmental Offices, Department of
the Treasury.
ACTION: Request for Information.
-----------------------------------------------------------------------
SUMMARY: The Federal Insurance Office (FIO) of the U.S. Department of
the Treasury (Treasury) is issuing this Request for Information (RFI),
following the May 20, 2021 Executive Order on Climate-Related Financial
Risk, to solicit public input on FIO's future work relating to the
insurance sector and climate-related financial risks. FIO's efforts
will focus on three initial climate-related priorities, which are
described below. Additionally, this RFI seeks input on how FIO's data
collection and dissemination authorities can best be used by FIO in
support of these priorities, as well as to monitor and assess the
insurance sector and climate-related financial risks.
DATES: Submit written comments on or before November 15, 2021.
ADDRESSES: Submit comments electronically through the Federal
eRulemaking Portal at https://www.regulations.gov, in accordance with
the instructions on that site, or by mail to the Federal Insurance
Office, Attn: Elizabeth Brown, Senior Insurance Regulatory Policy
Analyst, [email protected], (202) 597-2869, Room 1410 MT,
Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC
20220. Because postal mail may be subject to processing delays, it is
recommended that comments be submitted electronically. If submitting
comments by mail, please submit an original version with two copies.
Comments should be captioned ``FIO Insurance Sector and Climate-Related
Financial Risks.'' In general, Treasury will post all comments to
www.regulations.gov without change, including any business or personal
information provided such as names, addresses, email addresses, or
telephone numbers. All comments, including attachments and other
supporting materials, are part of the public record and subject to
public disclosure. You should submit only information that you wish to
make available publicly.
FOR FURTHER INFORMATION CONTACT: Steven Seitz, Director, Federal
Insurance Office, [email protected], (202) 531-0915; Stephanie
Schmelz, Deputy Director, [email protected], (202) 341-
5258; Elizabeth Brown, Senior Insurance Regulatory Policy Analyst,
[email protected], (202) 597-2869 or Bret Howlett, Senior
Insurance Regulatory Policy Analyst, [email protected], (202)
570-3916. Persons who have difficulty hearing or speaking may access
these numbers via TTY by calling the toll-free Federal Relay Service at
(800) 877-8339.
SUPPLEMENTARY INFORMATION:
Background
The Insurance Sector and Climate-Related Financial Risks
The Intergovernmental Panel on Climate Change (IPCC) reported this
year that ``[h]uman-induced climate change is already affecting many
weather and climate extremes in every region across the globe. Evidence
of
[[Page 48815]]
observed changes in extremes such as heatwaves, heavy precipitation,
droughts, and tropical cyclones, and, in particular, their attribution
to human influence, has strengthened since [2013].'' \1\ The United
States has experienced a dramatic increase in the frequency and
severity of climate-related disasters with a corresponding increase in
economic losses in the past 40 years.\2\ Economic growth combined with
changing socioeconomic trends, such as urbanization and the migration
patterns to areas at higher risk of climate-related disasters, are
increasing the financial risks associated with the effects of climate
change. The increased frequency and severity of climate-related
disasters, as well as the magnitude of associated insured losses,
highlight the significance of these climate-related financial risks and
the role of insurers in responding to them.\3\ Additionally, some
insurance consumers are increasingly unable to find affordable and
available property insurance coverage in certain insurance markets.\4\
---------------------------------------------------------------------------
\1\ IPCC, Climate Change 2021: The Physical Science Basis--
Summary for Policymakers, 7 August 2021, SPM-10, https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM.pdf.
\2\ See, e.g., Adam B. Smith, ``2010-2019: A Landmark Decade of
U.S. Billion-Dollar Weather and Climate Disasters,'' NOAA
Climate.gov Blog, January 8, 2020, https://www.climate.gov/news-features/blogs/beyond-data/2010-2019-landmark-decade-us-billion-dollar-weather-and-climate. FIO is using the term ``climate-related
disasters'' to refer to the type of weather-related events (such as
wildfires, floods, hurricanes, etc.) that may be produced or
exacerbated by climate change, as distinct from non-weather related,
natural events (such as earthquakes and tsunamis).
\3\ Aon, Weather, Climate & Catastrophe Insight Annual Report
2020 (2021), 9, https://www.aon.com/global-weather-catastrophe-natural-disasters-costs-climate-change-2020-annual-report/?utm_source=region&utm_medium=africa&utm_campaign=natcat21
(Aon 2020 Cat Insight Annual Report).
\4\ See, e.g., Christopher Flavelle, ``Wildfires Hasten Another
Climate Crisis: Homeowners Who Can't Get Insurance,'' New York
Times, September 2, 2020, https://www.nytimes.com/2020/09/02/climate/wildfires-insurance.html; Emma Kerr, ``Here's How You're
Already Paying for Climate Change,'' U.S. News & World Report, June
10, 2021, https://money.usnews.com/money/personal-finance/spending/articles/heres-how-youre-paying-for-climate-change.
---------------------------------------------------------------------------
The impact of climate change also affects insurers through their
broader role in financial markets. For example, the U.S. life insurance
sector is one of the largest investors in the U.S capital markets, with
over $4.7 trillion in investments held in general accounts at year-end
2020.\5\ As owners of significant amounts of assets, insurers could be
vulnerable to potential decreases in asset values arising from the
transition towards a low-carbon economy.\6\
---------------------------------------------------------------------------
\5\ Best's Special Report: First Look: 12 Month 2020 Life/
Annuity Financial Results (March 23, 2021), https://www.businesswire.com/news/home/20210323005711/en/Best%E2%80%99s-Special-Report-U.S.-LifeAnnuity-Industry%E2%80%99s-Net-Income-Cut-Nearly-in-Half-in-2020.
\6\ New York Department of Financial Services, An Analysis of
New York Domestic Insurers' Exposure to Transition Risks and
Opportunities from Climate Change (June 10, 2021), https://www.dfs.ny.gov/system/files/documents/2021/06/dfs_2dii_report_ny_insurers_transition_risks_20210610.pdf
---------------------------------------------------------------------------
More broadly, climate-related financial risks may present
challenges to the stability of the financial system (of which the
insurance sector is an important part) including as shocks that
increase financial system vulnerabilities. In a 2020 report, the
Financial Stability Board (FSB) described climate-related risks as
falling into three categories:
Physical risks are ``the possibility that the economic
costs of the increasing severity and frequency of climate-change
related extreme weather events, as well as more gradual changes in
climate, might erode the value of financial assets, and/or increase
liabilities.'' \7\
---------------------------------------------------------------------------
\7\ FSB, The Implications of Climate Change for Financial
Stability (November 23, 2020), 4, 16, https://www.fsb.org/wp-content/uploads/P231120.pdf (FSB Climate Change Implications
Report).
---------------------------------------------------------------------------
Transition risks can arise from the technological, market,
and policy changes needed to adjust to a low carbon economy and their
effects on the value of financial assets and liabilities. Depending on
the nature, speed, and focus of these changes, transition risks may
pose varying levels of financial and reputational risk to
organizations.\8\
---------------------------------------------------------------------------
\8\ See FSB Climate Change Implications Report; Task Force on
Climate-Related Financial Disclosures, Recommendations of the Task
Force on Climate-related Financial Disclosures (June 15, 2017), 13,
https://www.fsb-tcfd.org/publications/final-recommendations-report/.
---------------------------------------------------------------------------
Liability risks may ``arise when parties are held liable
for losses related to environmental damage that may have been caused by
their actions or omissions.'' \9\
---------------------------------------------------------------------------
\9\ FSB Climate Change Implications Report.
---------------------------------------------------------------------------
The same FSB report described how these risks might affect
financial stability and highlighted the potential for new risks
introduced from the response of the global financial system to climate-
related shocks.\10\
---------------------------------------------------------------------------
\10\ FSB Climate Change Implications Report, 1.
---------------------------------------------------------------------------
An assessment of how climate-related financial risks may affect the
insurance sector should consider physical risks, transition risks, and
liability risks. More specifically, the assessment should include how
the life and property & casualty (P&C) insurers' business models
(including their underwriting activities, market activities, and
investment activities) are affected by each category of risk.\11\
---------------------------------------------------------------------------
\11\ See, e.g., FSB Climate Change Implications Report, 23
(noting that, if the materialization of climate related risks were
to lead to large increases in insured losses from physical risks,
this might reduce the degree to which households and companies could
insure against these risks).
---------------------------------------------------------------------------
The lack of available data complicates the ability to conduct such
assessments. Government and private sector stakeholders have noted the
significant issues caused by the lack of available data to assess
climate-related financial risk within the insurance sector.\12\ These
stakeholders could all potentially benefit from high-quality,
consistent, comparable, and reliable data for their risk management,
disclosures, and forward plans to assess and address climate-related
financial risks. State regulatory tools, such as the Own Risk and
Solvency Assessment (ORSA), may capture data on some climate-related
financial risks if they are recognized by a reporting insurer as having
a material impact on its solvency over the next one to two years, but
these tools may be inadequate to assess climate-related risks,
particularly over a longer time horizon. Additionally, only six states
have regularly collected from insurers certain limited, high-level
qualitative data directly focused on climate-related financial
risks.\13\ No federal authority is collecting climate-related financial
data specific to the insurance sector.
---------------------------------------------------------------------------
\12\ FSB Climate Change Implications Report, 28; FSB and
International Monetary Fund, The Financial Crisis and Data Gaps: G20
Data Gaps Initiative (DGI-2) The Fifth Progress Report--Countdown to
2021 in Light of COVID-19 (October 2020), 7, https://www.fsb.org/wp-content/uploads/P071020.pdf; International Association of Insurance
Supervisors and Sustainable Insurance Forum, Application Paper on
the Supervision of Climate-related Risks in the Insurance Sector
(May 2021), 9, 12-13, 28, https://www.iaisweb.org/page/supervisory-material/application-papers/file/97146/application-paper-on-the-supervision-of-climate-related-risks-in-the-insurance-sector#; ``How
Insurance Companies Can Prepare for Risk from Climate Change,''
Deloitte, https://www2.deloitte.com/us/en/pages/financial-services/articles/insurance-companies-climate-change-risk.html.
\13\ National Association of Insurance Commissioners (NAIC)
Center for Insurance Policy and Research, Assessment of and Insights
from NAIC Climate Risk Disclosure Data (November 2020), 5-6, https://content.naic.org/sites/default/files/cipr-report-assessment-insights-climate-risk-data.pdf. The six states--California,
Connecticut, Minnesota, New Mexico, New York, and Washington--use
the Insurer Climate Risk Disclosure Survey developed by the NAIC.
The states require survey completion only by insurers that are
regulated by them and who annually report $100 million or more in
premiums and annuity considerations.
---------------------------------------------------------------------------
Executive Orders
The President's May 20, 2021, Executive Order on Climate-Related
[[Page 48816]]
Financial Risk emphasizes the important role that the insurance sector
can play in combatting climate change. It instructs the Secretary to
task FIO ``to assess climate-related issues or gaps in the supervision
and regulation of insurers, including as part of the [Financial
Stability Oversight Council] FSOC's analysis of financial stability,
and to further assess, in consultation with States, the potential for
major disruptions of private insurance coverage in regions of the
country particularly vulnerable to climate change impacts.'' \14\
---------------------------------------------------------------------------
\14\ Exec. Order No. 14,030 Sec. 3(b)(i), 86 FR 27967 (May 20,
2021), https://www.federalregister.gov/documents/2021/05/25/2021-11168/climate-related-financial-risk.
---------------------------------------------------------------------------
The May 20 Executive Order complements the President's January 27,
2021 Executive Order on Tackling the Climate Crisis at Home and Abroad,
which set forth the Administration's policy to ``organize and deploy
the full capacity of its agencies to combat the climate crisis to
implement a Government-wide approach.'' The President's January 27
Executive Order puts the climate crisis at the center of U.S. foreign
policy and national security and seeks to ``put the United States on a
path to achieve net-zero emissions, economy-wide, by no later than
2050.'' \15\
---------------------------------------------------------------------------
\15\ Exec. Order No. 14,008 Sec. 201, 86 FR 7619 (January 27,
2021), https://www.federalregister.gov/documents/2021/02/01/2021-02177/tackling-the-climate-crisis-at-home-and-abroad.
---------------------------------------------------------------------------
FIO's Authorities
Title V of the Dodd-Frank Wall Street Reform and Consumer
Protection Act established FIO within Treasury. FIO's statutory
authorities include, among other things, monitoring all aspects of the
insurance sector, including identifying issues or gaps in the
regulation of insurers that could contribute to a systemic crisis in
the insurance sector or the U.S. financial system. FIO's authorities
also include monitoring the availability and affordability of insurance
products for traditionally underserved communities and consumers,
minorities, and low- and moderate-income persons.\16\ These segments of
the population may be negatively and disproportionately impacted by
climate change.\17\
---------------------------------------------------------------------------
\16\ 31 U.S.C. 313(c)(1)(A)-(B).
\17\ See, e.g., Alexa Jay et al., ``Overview,'' in Impacts,
Risks and Adaptation in the United States: Fourth National Climate
Assessment (2018), 36, https://nca2018.globalchange.gov/downloads/NCA4_Ch01_Overview.pdf.
---------------------------------------------------------------------------
In addition, FIO is authorized to collect data and information on
and from the insurance sector, including through the use of
subpoenas.\18\ FIO is also authorized to analyze and disseminate data
and information and issue reports on all lines of insurance, except
health insurance.\19\
---------------------------------------------------------------------------
\18\ 31 U.S.C. 313(e)(6).
\19\ 31 U.S.C. 313(e)(1).
---------------------------------------------------------------------------
Because climate change is a global phenomenon, FIO's international
insurance statutory authorities can help achieve U.S. goals in this
area. FIO is authorized to coordinate federal efforts and develop
federal policy on prudential aspects of international insurance
matters, including representing the United States, as appropriate, in
the International Association of Insurance Supervisors (IAIS).\20\
Finally, the FIO Director also serves as a non-voting member of the
FSOC.\21\ The May 20 Executive Order directs that FIO contribute to
FSOC's analysis of financial stability related to climate change.\22\
---------------------------------------------------------------------------
\20\ 31 U.S.C. 313(c)(1)(E).
\21\ 12 U.S.C. 5321(b)(2)(B).
\22\ Exec. Order No. 14,030 Sec. 3(b)(i).
---------------------------------------------------------------------------
FIO's Current Engagement on Climate-Related Issues
FIO's role and statutory authorities enable it to take a leadership
position in analyzing how the insurance sector may be impacted by, and
help mitigate, climate-related risks. FIO is engaging with the NAIC and
state insurance regulators through their work on climate-related
topics.\23\ FIO also represents the United States at the IAIS, is a
member of the UN's Sustainable Insurance Forum, and is a member of the
Organisation of Economic Cooperation and Development's Insurance and
Private Pensions Committee--all of which are increasingly focused on
climate-related issues. In addition, FIO is discussing climate-related
issues with insurance authorities in both the United States and the
European Union through the EU-U.S. Insurance Project. FIO also
represents Treasury in the federal Mitigation Framework Leadership
Group, which is a national structure to coordinate disaster mitigation
efforts across the federal government and with state, local, tribal,
and territorial representatives. FIO is engaging with the Securities
and Exchange Commission and other members of the FSOC on climate-
related financial risks. More generally, FIO provides insurance
expertise and technical assistance within Treasury and to other federal
agencies, including to the Federal Emergency Management Agency in
connection with the National Flood Insurance Program (NFIP). FIO's
engagement on climate-related issues also includes the issuance of
public reports addressing natural disasters, climate change, and
insurance, including through its annual report to Congress and the
President.\24\
---------------------------------------------------------------------------
\23\ See, e.g., David Altmaier, Presidential Address (speech,
NAIC Spring 2021 Opening Session, April 12, 2021), https://content.naic.org/article/notice_spring_2021_opening_session_prepared_remarks.htm.
\24\ See, e.g., FIO, Report Providing an Assessment of the
Current State of the Market for Natural Catastrophe Insurance in the
United States (2015), https://home.treasury.gov/system/files/311/Natural%20Catastrophe%20Report.pdf. See also ``Reports and
Notices,'' FIO, https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices (providing links to all FIO Annual Reports
and other reports).
---------------------------------------------------------------------------
FIO's Initial Climate-Related Priorities
FIO intends for its climate-related work to respond not only to the
Executive Orders, but also to provide an insurance-specific focus
within Treasury's broader climate work, including working with
Treasury's Climate Hub.\25\ In particular, FIO intends to initially
focus on the following three climate-related priorities:
---------------------------------------------------------------------------
\25\ See U.S. Department of the Treasury, ``Treasury Announces
Coordinated Climate Policy Strategy with New Treasury Climate Hub
and Climate Counselor,'' news release, April 19, 2021, https://home.treasury.gov/news/press-releases/jy0134.
---------------------------------------------------------------------------
1. Insurance Supervision and Regulation: Assess climate-related
issues or gaps in the supervision and regulation of insurers, including
their potential impacts on U.S. financial stability.
Maintaining the financial stability of the insurance sector will
involve identifying and filling gaps (if any) in insurance supervision
with a focus on assessing climate-related financial risks. This will
include monitoring the integration of climate-related financial risks
into insurance supervisory practices and regulatory frameworks, as well
as assessing whether sufficient data, methodologies, and tools exist to
manage the solvency of insurers and to protect them against the long-
term risk of climate change. To that end, FIO plans to assess
supervisory practices and resources, including but not limited to
examination policies and procedures, solvency assessment and
techniques, data availability and integrity, public disclosures,
modeling, and forward-looking assessments (e.g., scenario analysis,
stress testing). FIO will consult with individual state insurance
regulators and the NAIC during its assessment of such supervisory
practices and resources.
2. Insurance Markets and Mitigation/Resilience: Assess the
potential for
[[Page 48817]]
major disruptions of private insurance coverage in U.S. markets that
are particularly vulnerable to climate change impacts; facilitate
mitigation and resilience for disasters.
Growing evidence indicates that climate change may be associated
with a decline in the availability and affordability of insurance
provided by the private sector (i.e., private insurance coverage) in
certain markets.\26\ The creation and expansion of insurers of last
resort by individual U.S. states and the federal government highlights
this problem.\27\ FIO intends to examine the insurability of disasters
that are produced or exacerbated by climate change, including
wildfires, hurricanes, floods, wind damage, and extreme temperatures.
---------------------------------------------------------------------------
\26\ See, e.g., FIO, Annual Report on the Insurance Industry
(September 2020), 59-60, https://home.treasury.gov/system/files/311/2020-FIO-Annual-Report.pdf. See also Exec. Order No. 14,030 Sec.
3(b)(i) (directing FIO to assess ``the potential for major
disruptions of private insurance coverage in regions of the country
particularly vulnerable to climate change impacts'' as distinct from
insurance provided by or backed by a government entity, such as the
federal NFIP. (emphasis added)).
\27\ See, e.g., ``California FAIR Plan Property Insurance,''
https://www.cfpnet.com; ``About Us: Who We Are,'' Citizens Property
Insurance Corporation, https://www.citizensfla.com/who-we-are;
Congressional Research Service, Introduction to the National Flood
Insurance Program (NFIP), Report No. R44593 (Jan. 5, 2021), 1,
https://fas.org/sgp/crs/homesec/R44593.pdf.
---------------------------------------------------------------------------
Additionally, traditionally underserved communities and consumers,
minorities, and low- and moderate-income persons may have
disproportionate challenges in obtaining affordable property insurance
to cover the risks posed by climate-related disasters; further declines
in available and affordable insurance could exacerbate the inequities
that these persons face.\28\ This situation underscores the need to
identify solutions to address the growing protection gap exacerbated by
climate change.\29\ Therefore, FIO also intends to assess the
availability and affordability of insurance coverage in high-risk
areas, particularly for traditionally underserved communities and
consumers, minorities, and low- and moderate-income persons.
---------------------------------------------------------------------------
\28\ See, e.g., Rachel Morello-Frosch, et al., The Climate Gap:
Inequalities in How Climate Change Hurts Americans & How to Close
the Gap (2018), 17, https://dornsife.usc.edu/assets/sites/242/docs/ClimateGapReport_full_report_web.pdf.
\29\ See, e.g., Aon 2020 Cat Insight Annual Report; Federal
Advisory Committee Protection Gap Subcommittee, Addressing the
Protection Gap Through Public/Private Partnerships & Other
Mechanisms, (December 5, 2019), https://home.treasury.gov/system/files/311/December2019FACI_ProtectionGapPresentation.pdf; ACPR, A
First Assessment of Financial Risks Stemming from Climate Change:
The Main Results of the 2020 Climate Pilot Exercise, No. 122-2021
(2021), 60, https://acpr.banque-france.fr/sites/default/files/medias/documents/20210602_as_exercice_pilote_english.pdf.
---------------------------------------------------------------------------
Beyond analyzing potential insurance market disruptions, FIO
intends to look at solutions, including identifying best practices for
mitigation that can then increase post-disaster resilience, including
solutions that can help ensure sufficient availability and
affordability of insurance for consumers in light of increasing
climate-related disaster risk. In addition, FIO will examine the role
of insurers in supporting climate resilience in critical
infrastructure, as well as in supporting green investment initiatives.
3. Insurance Sector Engagement: Increase FIO's engagement on
climate-related issues; leverage the insurance sector's ability to help
achieve climate-related goals.
FIO plans to increase its engagement on climate-related issues and
take a leadership role in analyzing how the insurance sector may help
mitigate climate-related risks. Throughout this work, FIO will engage
with stakeholders, including through this RFI. Additionally, the
insurance sector has the ability to shape industries, products, and
practices through its functions in the financial markets and broad
understanding of risk. Thus, it can influence climate-related activity
of other sectors of the U.S. economy. FIO therefore will engage with
the insurance sector to assess how the sector may help achieve national
climate-related goals, including mitigation, adaptation, and transition
to a lower carbon economy. This could include insurance sector
consideration of underwriting activities, investment holdings, and
business operations to support a low emissions economy.\30\ It also
could encompass insurance sector transition of its operational and
attributable greenhouse gas (GHG) emissions.\31\ In addition, FIO plans
to consider ways to address the lack of common methodology and
standardization in measuring financed emissions, particularly those of
non-public companies in which the insurance sector underwrites and
invests. Currently, only one state has passed legislation that is
intended to leverage the insurance sector's ability to affect GHG
emissions.\32\
---------------------------------------------------------------------------
\30\ See, e.g., U.N. Environment Programme Finance Initiative,
``The Net Zero Insurance Alliance, Statement of Commitment by
Signatory Companies'' (July 2021), 1 n. 1, https://www.unepfi.org/psi/wp-content/uploads/2021/07/NZIA-Commitment.pdf.
\31\ GHG includes Scope 1, 2, and 3 emissions. Scope 1 emissions
are direct GHG emissions that occur from sources controlled or owned
by an entity (such as an insurer). Scope 2 emissions are indirect
GHG emissions associated with purchase of electricity, steam, heat,
or cooling by an entity. Scope 3 emissions are all other indirect
GHG emissions not covered by Scope 2 and where an entity may impact
in the value chain, such as business travel and investments. For
insurers, Scope 3 emissions would include the Scope 1, 2, and 3
emissions by policyholders when significant (and when data is
available to determine them). See, e.g., ``Scope 1 and Scope 2
Inventory Guidance,'' U.S. Environmental Protection Agency (EPA),
https://www.epa.gov/climateleadership/scope-1-and-scope-2-inventory-guidance; ``Scope 3 Inventory Guidance,'' EPA, https://www.epa.gov/climateleadership/scope-3-inventory-guidance.
\32\ Claire Wilkinson, ``Connecticut Bill Calls for Regulation
of Insurers' Climate Risks,'' Business Insurance, June 17, 2021,
https://www.businessinsurance.com/article/20210617/NEWS06/912342605/Connecticut-bill-calls-for-regulation-of-insurers%E2%80%99-climate-risks.
---------------------------------------------------------------------------
I. Request for Comments
Below, FIO invites public comments on a series of questions. The
responses to this RFI will help inform FIO's assessment of the
implications of climate-related financial risks for the insurance
sector. It also will help FIO better understand (1) which data elements
are necessary to accurately assess climate risk; (2) which data
elements remain unavailable; and (3) how FIO could collect this data
and make it available to stakeholders as needed. Access to high-
quality, reliable, and consistent data will be necessary for
accomplishing all three of FIO's initial climate-related priorities.
FIO also will identify and issue recommendations on individual actions
that can be taken by various insurance sector stakeholders (such as
state insurance regulators, insurers, and policyholders) to address
climate-related financial risks and facilitate the U.S. insurance
sector's transition to a more sustainable future. FIO recognizes that
an effective policy response to climate-related financial risk requires
an iterative approach and intends to adjust its work and priorities as
needed.
Executive Order on Climate-Related Financial Risk
1. Please provide your views on how FIO should assess and implement
the action items set forth for FIO in the Executive Order on Climate-
Related Financial Risk.\33\
---------------------------------------------------------------------------
\33\ Exec. Order No. 14,030 Sec. 3(b)(i).
---------------------------------------------------------------------------
FIO's Initial Climate-Related Priorities
2. Please provide your views on FIO's three climate-related
priorities and related activities, particularly with regard to whether
there are alternative or additional priorities or activities that FIO
should evaluate regarding the impact of climate change on the insurance
sector and the sector's effect on mitigation and adaptation efforts.
[[Page 48818]]
Climate-Related Data and FIO's Data Collection and Data Dissemination
Authorities
3. What specific types of data are needed to measure and
effectively assess the insurance sector's exposures to climate-related
financial risks? If data is not currently available, what are the key
challenges in the collection of such climate-related data? In your
response, please provide your views on the quality, consistency,
comparability, granularity, and reliability of the available or needed
data and associated data sources.
4. What are the key factors for the insurance sector in developing
standardized, comparable, and consistent climate-related financial risk
disclosures? In your response, please discuss whether a global approach
for disclosure standards needs to be adopted domestically for insurers.
Please also address the advantages and disadvantages of current
proposals to standardize such disclosures, such as those set forth by
the Task Force on Climate-Related Financial Disclosures or the NAIC's
Insurer Climate Risk Disclosure Data Survey.
5. Please provide your views on how FIO's data collection and
dissemination authorities should be used by FIO to research, monitor,
assess, and publicize climate-related financial risk and other areas of
the insurance markets that are affected by climate change.
6. What are the likely advantages and disadvantages of a verified,
open-source, centralized database for climate-related information on
the insurance sector? Please include in your response the types of
information, if any, that may be most useful to disseminate through
such a database and the key elements in the development and design of
such a database.
Insurance Supervision and Regulation
7. How should FIO identify and assess climate-related issues or
gaps in the supervision and regulation of insurers, including their
potential impact on financial stability? In your response, please
address insurance supervision and regulations concerning: (a)
Prudential concerns, (b) market conduct regarding insurance products
and services, and (c) consumer protection. In addition, please discuss
how FIO should assess the effectiveness of U.S. state insurance
regulatory and supervisory policies in addressing and managing the
climate-related financial risks with regard to the threat they may pose
to U.S financial stability, including identifying (1) the major
channels through which climate-related physical, transition, and/or
liability risks may impact the stability of the U.S. insurance market,
and (2) the degree to which insurers' business models could be affected
by each category of risk and the relevant time horizons for such
effects.
8. Please identify the key structural issues that could inhibit the
ability of insurance supervisors to assess and manage climate-related
financial risk in the insurance sector (e.g., accounting frameworks,
other standards). What barriers could inhibit the integration of
climate-related financial risks into insurance regulation?
9. What approaches used by other jurisdictions or multi-national
organizations should FIO evaluate that would help inform it about
existing supervisory and regulatory issues and gaps concerning climate-
related financial risks? Please describe these approaches, including
their advantages and disadvantages, as well as available data sources
on these approaches.
Insurance Markets and Mitigation/Resilience
10. What factors should FIO consider when identifying and assessing
the potential for major disruptions of insurance coverage in U.S.
markets that are particularly vulnerable to climate change impacts?
11. What markets are currently facing major disruptions due to
climate change impacts? What markets are likely to be at risk for major
disruptions due to climate change impacts in the future? When
discussing markets at risk for future disruption, please estimate the
likely time horizons (e.g., 5, 10, 20, or more years) when these
disruptions may occur.
12. Climate change is currently exacerbating economic losses caused
by weather-related disasters and is projected to cause further damage
in the future. Please provide information on the actions that insurers
have taken in response to the threat of increased economic losses from
climate-related disasters, including how insurers are incorporating
mitigation and resilience considerations into their business
operations, as well as what other strategies or solutions that insurers
or U.S. regulators may want to explore that would help insurers
mitigate the impact of climate change and build resilience.
13. To what extent, if any, are models (whether internal
proprietary models, open-source models, or third-party vendor models)
used in the underwriting process to consider the impact of climate
change? How do these models affect pricing of insurance products and
business decisions (e.g., level of catastrophe exposure, utilization of
reinsurance)? What are the best practices for model validation?
14. How should FIO assess the availability and affordability of
insurance coverage in U.S. markets that are particularly vulnerable to
climate change impacts? In your response, please discuss how to balance
maintaining insurer solvency with the need to address the availability
and affordability of insurance products responsive to perils associated
with climate-related risks, particularly for traditionally underserved
communities and consumers, minorities, and low- and moderate-income
persons.
15. In what areas have public-private partnerships or
collaborations among state or local governments been effective in
developing responses to climate change that may be taken by the
insurance sector or insurance regulators? How can FIO evaluate the
potential long-term or permanent effects on the insurance sector of
such public-private partnerships or state and local collaborations to
address climate-related risks? How should FIO consider state insurance
regulatory efforts on consumer education related to climate risks?
Insurance Sector Engagement
16. Please provide your views on additional ways that FIO should
engage with the insurance sector on climate-related issues.
17. How should FIO assess the efforts of insurers, through their
underwriting activities, investment holdings, and business operations
to meet the United States' climate goals, including reaching net-zero
emissions by 2050? For example, what steps should the insurance sector
be taking to help improve transparency, comparability, and assessment
of Scope 1, Scope 2, and, to the extent possible, Scope 3 GHG
activities?
18. What role or actions might states take to encourage the
insurance sector's transition to a low emissions environment and an
adaptive and resilient economy? In your response, please discuss
whether efforts by states to encourage the development of new insurance
products, to promote sustainable investment and underwriting
activities, and to address protection gaps created by climate-related
financial risks might facilitate this transition.
General
19. Please provide any additional comments or information on other
issues or topics that may be relevant to
[[Page 48819]]
FIO's work on insurance and climate-related risks.
Steven E. Seitz,
Director, Federal Insurance Office.
[FR Doc. 2021-18713 Filed 8-30-21; 8:45 am]
BILLING CODE 4810-AK-P
